Analyze each of the following investment strategies assuming you believe the “market efficiency” hypothesis (This should be around a page- single-spaced). Which one would likely be the most successful and why?

a. William reads the Wall Street Journal every morning and invests in stocks based on the insights he gains from reading the articles. He actively buys and sells shares based on this information.

b. Sarah has picked 50 stocks on the NYSE based on only buying companies that have the letter “u” in their name. She has never changed the portfolio choices she made initially.

c. Gary works for a law firm that deals with corporate mergers and acquisitions and frequently trades stocks based on the confidential information (i.e. a company is buying another company for a premium or an announced merger is now going to be canceled) he gathers at work.

d. Gibco hedge fund has developed a tool using supercomputing technology that can predict state primary election outcomes and the effect on the NYSE in the first hour of trading the day after the primary. Their predictive model has never been wrong.

e. Kelly has invested in an S&P Index ETF and has not changed her portfolio since her initial purchases.

Answer rating: 100% (QA)

Investment Strategy Analysis in the Context of Market Efficiency Hypothesis The market efficiency hypothesis posits that financial markets rapidly inc... View the full answer